Business and Company Law - the Precise Nature of Johns Advertisement - Case Study Example

?Business and Company Law Question One The Precise Nature of John’s Advertisement Offer and acceptance provide the means by which courts analyze the negotiating process to determine whether a contract has been entered into, the time the contract was made and the primary terms and conditions of the contract (Gibson v Manchester City Council, 1978). John’s announcement in the window, is arguably an offer, which begins the negotiation process. To start with the nature of the offer must manifest an intention to create legal relations or an intention to be bound by an acceptance of his offer (Chen-Wishart, 2008). A valid offer thus contains a proposed terms for an exchange and an indication that the offeror is willing to be bound when the offeree accepts the offer. In assessing the extent to which John’s offer is a valid offer manifesting an intention to create legal relations, the courts will apply an objective test. In doing so, the question is the offeror’s conduct was such that a reasonable person would believe that an offer was being made and the offeree believes that the offer is a genuine one and not insincere (Harvey v Facey, 1893). However, there is an exception to the display of goods in a shop window and shop signs which are described as invitations to treat rather than offers (Pharmaceutical Society v Boots Chemists, 1953). However, this rule is not rigidly applied and depends on the intent of the advertisement. For instant an advertisement that demonstrates a serious intent to satisfy a promise if certain conditions are met will not be treated as an invitation to treat, but rather an offer (Carbolic Smoke Ball Co., 1893). The fact that John owns an art gallery and placed the advertisement in the window of his Art Gallery, would indicate that his conduct is such that his offer is genuine and certainly any reasonable person would be led to believe that he was making a serious offer. It therefore follows that John is making an offer to enter into a legally binding contract, and that is the precise nature of his advertisement. Whether Mick has Entered into A Binding Contract with John Acceptance should generally mirror the offer made in order to form a legally binding contract. The acceptance must correspond with the offer in order to form a valid contract and should be communicated to the offerer in the form required by the offer (Chen-Wishart, 2008). John offered to sell a Matisse Painting for 5000 pounds cash to the first person who accepts it on Saturday the 12th and that the offer would expire after one day. Mick’s acceptance did not mirror John’s offer. Although Mick’s acceptance was in writing, posted and arrived on time, he offered to pay 4,800 pounds. Thus the offer of 4,800 pounds does not match John’s offer. Mick’s acceptance suggesting a sale for 4,800 pounds instead of 5,000 pounds as stipulated in the John’s offer, represents a counter-offer and effectively dispenses with the original offer. For instance in Hyde v Wench (1840), the defendant offered to sell a farm to the plaintiff for 1,000 pounds and the plaintiff indicated that he could only afford 950 pounds. The defendant did not agree to the reduced sale, and the plaintiff then relented agreeing to pay the original 1,000 pounds requested. However, the defendant refused to sell the farm for either sum. It was held that the plaintiff’s statement that he could only pay 950 pounds was counter offer which effectively meant that the original offer was essentially removed from the negotiations and there was no obligation to sell the property for 1,000 pounds. It therefore follows that since Mick effectively rejected John’s offer by making a counter offer, John is under no obligation to sell the painting to Mick. There is no contract and thus there is no obligation to continue negotiating with Mick. Since John was not interested in Mick’s counter offer, he had no obligation to communicate this rejection of the counter offer (Chen-Wishart, 2008). Whether Ronnie has any Right of Action Against John Ronnie’s acceptance of the offer did not meet the required form of the offer. The offer was for 5,000 pounds cash. Ronnie’s acceptance was based on the tender of a 5,000 check. Thus John was at liberty to reject the offer. The tendering of a check may well be interpreted as a counter offer since the offer was for a cash sale. Thus, John is at liberty to reject the counter offer pursuant to the ruling in Hyde v Wench (1840). Moreover, John is at liberty to reject an acceptance or to withdraw from communications at any time prior to completing a contract, providing his rejection or withdrawal is communicated to the Ronnie (Byrne v Van Tienhoven (1880). John communicated his revocation of the offer with respect to Ronnie and thus is under no obligation to sell the painting to Ronnie. Whether Charlie has any Right of Action Against John John is at liberty to extend the time stipulated for keeping the offer open (Chen-Wishart, 2008). When Charlie asked for the offer to be extended to Monday to allow him time to secure the cash from his bank, and John agreed, the offer was modified to last beyond one day. However, this did not change the terms of the offer in terms of selling to the first person who paid the stipulated funds in cash. Thus, John was not obligated to close the offer and treat it as if he had concluded an agreement with Charlie (Chen-Wishart, 2008). An offer can be closed at any time provided a contract has not been concluded (Routledge v Grant, 1828).Thus John does not have a contract with Charlie. Whether John has any right of Action Against Marianne Generally, once an offer has been accepted a contract is formed (Brinkibon Ltd. v Staghag Stahl und Stahlwarengesellschaft mbH (1983). Once communication of the acceptance is perfected and the acceptance mirrors the offer, then a contract is formed. It would appear that Marriane, made a counter offer when she paid the sum of 6,000 in cash to John. However, John accepted the cash and the counter-offer and acceptance was perfected unequivocally. Therefore Marriane is not at liberty to change her mind as a legally binding contract under consideration has been formed. Question Two The Exclusion from Liability Clause and the Hotel’s Liability The exemption of liability clause in which the hotel is attempting to limit/exclude liability relative to injuries sustained by guest using sporting facilities will depend on whether or not it is valid and provided John had the requisite notice of its existence. The general rule is that contracting parties are bound by exemption of liability clauses that are included in the contract between them (Mulcahy & Tillotson, 2004). Moreover, notice must be prominently displayed or otherwise brought to the attention of the party against whom the clause will be used (Mulcahy & Tillotson, 2004). In the event, the exclusion from liability clause is not displayed prominently, it does not matter whether or not the other party read the clause or not (Thomas v LM & S Ry 1930). The exclusion from liability clause appears to be sufficiently displayed as John was specifically asked to sign a disclaimer. However, it did not appear to be clear enough, because John a business man who is obviously of significant intelligence was unable to understand the contents and made further inquiries. He was told that the hotel would not be liable for injuries incurred if John was not fit. It can therefore be concluded that the contents of the exclusion of liability clause were difficult to understand. It was held in Baldry v Marshall (1925) that in order for an exclusion clause to be binding, it must be clear and concise. Moreover, the court would not be flexible in circumstances where parties use clauses attempting to restrict liability for damages amounting to personal injuries are sustained (Baldry v Marshall, 1925). Additionally, Section 4 of the Unfair Contract Terms Act (1977), an exclusion clause cannot generally be enforced when one of the parties to the contract is a consumer, unless the clause is reasonable. This section is founded on principles of inequality of bargaining position. The ‘good faith’ doctrine primarily relies on upon the strength of the respective bargaining positions of the parties and determines whether or not it is fair and reasonable in the circumstances to validate the exclusion clause (Mulcahy & Tillotson, 2004). Although John is a business man, he is a guess at the hotel and is at the hotel as a guest and therefore a consumer. The clause will be interpreted as a clause aimed at all of its guest and will not distinguish between them on the basis of their respective levels of education and professional backgrounds. All guest at the hotel in their capacity as guest will be regarded as consumers. John is not at the hotel conducting business with them in circumstances that would put them on an equal footing. It therefore follows that John is not bound by the exclusion from liability clause. Likewise, the hotel may not use the exclusion from liability clause to escape liability for John’s personal injuries. Damages Sustained by John for Financial Harm and Mental Distress John is entitled to all damages sustained as a result of injuries found to have resulted from negligence or faulty equipment on the hotel property. Since John is not a trespasser, the hotel is responsible for consequential losses sustained as a result of negligence of defective equipment on the premises. All quantifiable and general damages can be recovered provided those damages can be proven (Mulcahy & Tillotson, 2004). However, mental distress requires psychiatric injury usually referred to as nervous shock. If John can obtain medical evidence of psychiatric harm he will be able to recover damages for mental distress (Mulcahy & Tillotson, 2004). In other words, any damages that are consequential to the negligence of the hotel or faulty equipment on the premises can be recovered provided it can be proven. There is no general right to recover damages for mental distress as a sole consequential loss. However, when claimed together with personal physical damages, mental distress can be claimed. As Gilliker (2000) explains: Whilst there is no evidence to support a right to claim such damages in their own right, there is sufficient authority for a separate head of damages as part of the claimant’s general compensatory claim (p.19). Similarly, it is generally accepted that individuals may not make a claim in tort for pure economic loss (Hedley Byrne & Co. Ltd. v Heller & Partners Ltd 1946. However, there is a right to recover economic loss resulting from physical injuries sustained as a result of the defendant’s negligence (Baker v Bolton 1808). Thus loss of income as a result of injuries would be permissible. John is therefore at liberty to make a claim for mental distress and financial loss. Financial Loss Arising out of the Injuries. John is entitled to all consequential losses arising out of his injuries provided he can prove that the injuries were a direct result of the incident at the hotel. Financial loss alone can be problematic. The general rule in this regard is reflected in the words of Lord Oliver (1991) who stated that: The infliction of physical injury to the person or property of another universally requires to be justified. The causes of economic loss does not (Murphy v Brentwood District [1991] 1 AC 398, p. 487). The tort of negligence it thus restrictive in its approach to awarding damages for negligence which results in disruption of an individual’s trade and any other purely commercial interests. This is the general rule under British law. However if the plaintiff’s claim for financial loss is related to his/her suffering physical injuries, the plaintiff may recover economic loss (Societe Remorquage a Helice v Bennets 1911). The idea is to establish that the pure economic loss is not too remote. Obviously, if the plaintiff sustains only economic loss as a result of the defendant’s negligence, the courts have the task of establishing whether or not the economic loss was a remote possibility. If the plaintiff suffered a physical injury as a result of the defendant’s negligence, the economic loss cannot be seen as remotely possible. In other words the financial damages be reasonably foreseeable. The reality is, if an individual sustains physical injuries as a result of the defendant’s negligence, any consequential loss is reasonably foreseeable. Thus John, having suffered physical injuries as a result of the defendant’s negligence, may also claim financial loss. Therefore, John in making a claim for damages against the hotel may include any other losses sustained as a result of the defendant’s negligence. Bibliography Baker v Bolton [1808] 1 Camp 493. Baldry v Marshall (1925) 1 KB 260. Brinkibon Ltd. v Staghag Stahl und Stahlwarengesellschaft mbH [1983] 2 AC 34. Carbolic Smoke Ball Co.,[1893] 1 QB 256. Chen-Wishart, M. (2008). Contract Law. Oxford, UK: Oxford University Press. Gibson v Manchester City Council [1978] 1 WLR 520. Gillier, P. (March 2000). “A ‘New’ Head of Damages: Damages for Mental Distress in the English Law of Torts.” Legal Studies, Vol. 20(1): 19-41. Harvey v Facey [1893] AC 552. Byrne v Van Tienhoven [1880] 5 CPD 344. Hedley Byrne & Co. Ltd. v Heller & Partners Ltd [1946] AC 465. Hyde v Wench [1840] 49 ER 132. Mulcahy, L. and Tillotson, J. (2004). Contract Law in Perspective. London, UK: Cavendish. Murphy v Brentwood District [1991] 1 AC 398. Pharmaceutical Society v Boots Chemists [1952] 2 All ER 456. Routledge v Grant [1828] 130 ER 920. Societe Remorquage a Helice v Bennets [1911] 1 KB 243). Thomas v LM & S Ry (1930) 1 KB 41. Unfair Contract Terms Act 1977. Read More